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The government may have to provide relief of about ₹7,000-7,500 crore to borrowers having loan exposure of over ₹2 crore as the Supreme Court, on Tuesday, ruled that all borrowers will be eligible for waiver of interest on interest in respect of pandemic-related loan moratorium.
The government has already picked up the tab towards waiver of interest on interest for loans up to ₹2 crore, irrespective of whether moratorium was availed or not, following the top court’s order in October 2020. This cost the exchequer was about ₹6,500 crore.
Anil Gupta, Vice-President – Financial Sector Ratings, ICRA, said: “As per our estimates, the compounded interest for six months of moratorium across all lenders is estimated at ₹13,500-14,000 crore.
“The government had already announced relief for borrowers having borrowings up to ₹2 crore, which was estimated to cost about ₹6,500 crore to the exchequer.”
Additional relief
With the announcement of waiver for all borrowers, the additional relief of about ₹7,000-7,500 crore will need to be provided to borrowers, he said.
The apex court, on Tuesday, also vacated its September 3, 2020, interim order that directed lenders that accounts that were not declared as NPA till August 31, 2020, shall not be declared as NPA till further orders.
As per ICRA’s estimates, on a proforma basis (taking into account the apex court’s direction that accounts that were not declared as NPA till August 31, 2020 shall not be declared as NP A till further orders), the Gross Non-Performing Assets (GNPAs) of banks stood at ₹8.7-lakh crore, or 8.3 per cent of advances, against the reported GNPA of ₹7.4 lakh (7.1 per cent) as on December 31, 2020.
Also, on a proforma basis, the Net NPA (NNPA) for banks stood at ₹2.7-lakh crore or 2.7 per cent of advances against the reported NNPA for all banks of ₹1.7-lakh crore (1.7 per cent) as on December 31, 2020.
Hence, in the absence of standstill by the Supreme Court, the Gross NPAs for banks would have been higher by ₹1.3-lakh crore (1.2 per cent) and Net NPAs higher by ₹1.0-lakh crore (1.0 per cent).
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